Justia Insurance Law Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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This case involves a dispute between Zhen Feng Lin, a food delivery driver who was severely injured in a car accident, and his employer's insurance company, Hartford Accident and Indemnity Company. After the accident, Lin received a settlement from the at-fault driver's insurance company, and workers' compensation benefits from his employer's insurance carrier, Hartford Fire Insurance Company. Lin later sought additional recovery under his employer's underinsured motorist policy with Hartford Accident.The United States Court of Appeals for the Seventh Circuit affirmed the district court's decision that Lin and Hartford Accident had not entered into a "settlement agreement" as defined by the insurance policy. As a result, the court ruled that the policy limits should be reduced by the amount Lin received in workers' compensation benefits. The court also agreed with the district court that Lin should be credited for the amount he paid to settle the workers' compensation lien.Additionally, the court affirmed the district court's dismissal of Lin's counterclaims for bad faith and breach of contract. The court found no plausible claim supporting the argument that Hartford Accident unreasonably delayed settling Lin's claim. Lin's request for statutory penalties for Hartford Accident's purported delay in handling his claim was also denied.Finally, the court denied both parties' motions for sanctions. Lin's appeal was deemed frivolous in part, but the court exercised its discretion not to impose sanctions. View "Hartford Accident and Indemnity Company v. Lin" on Justia Law

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Margrit Meier, owner of a restaurant called Hartland Inn, filed a coverage request with Wadena Insurance Company after a fire destroyed her business. The policy entitled her to the "actual cash value" of the property at the time of the fire, but the parties disagreed on how to calculate this. Wadena initially paid Meier $775,000, using a method called the "Broad Evidence Rule" to calculate actual cash value. Dissatisfied, Meier hired a third-party adjuster, who estimated a higher value. Wadena then increased its estimate and paid an additional $60,135.79. Still unsatisfied, Meier invoked the policy’s panel appraisal option.The appraisal process was completed, and the umpire arrived at an independent estimate of the building’s actual cash value. However, Meier filed a second lawsuit, alleging breach of contract and bad faith, and sought to set aside the appraisal award as invalid under state law. The district court dismissed the action, observing that Wadena complied with the alternative dispute resolution process and paid out the binding award.The United States Court of Appeals For the Seventh Circuit affirmed the district court's decision, stating there was no breach of contract or bad faith on Wadena's part. The court upheld that the Broad Evidence Rule was correctly applied to calculate the actual cash value of the property. The court also affirmed the district court’s denial of Wadena’s motion for sanctions under Federal Rule of Civil Procedure 11. View "Meier v. Wadena Insurance Company" on Justia Law

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Aluminum Recovery Technologies (ART) operates a smelter and during a renovation, one of its furnaces failed, causing molten aluminum to escape and damage the plant and the furnace itself. The insurance company, ACE American Insurance, paid for some of the damages but not the cost of replacing the furnace's refractory. ART sued ACE, arguing that an explosion in the furnace caused the damage and thus, the insurance company should cover the refractory replacement costs. However, the insurer argued that the policy specifically excludes coverage for any damage to the refractory lining unless it directly results from specific perils such as fire, lightning, windstorm, hail, or explosion. The United States Court of Appeals For the Seventh Circuit affirmed the district court's decision in favor of ACE. The court held that the explosion did not necessarily cause the leak, and ART failed to provide engineering evidence to support its claims. Additionally, the court found that ART had consented to the investigation protocol proposed by the insurer's experts, which involved destructive testing that led to the need for the refractory's replacement. Therefore, the insurer was not responsible for the additional expenses incurred due to the replacement of the refractory lining. View "Aluminum Recovery Technologies, Inc. v. Ace American Insurance Co." on Justia Law

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In this case heard in the United States Court of Appeals for the Seventh Circuit, an accident occurred at a construction site which resulted in bodily injuries to Gaylon Cruse and Mark Duckworth. During the installation of roof trusses, a power crane operated by Douglas Forrest was prematurely released, causing a truss to fall and collapse onto other trusses, injuring Cruse and Duckworth. Southern Truss, the owner of the truck to which the crane was attached, had two insurance policies - a commercial auto policy from Artisan and Truckers Casualty Company (Artisan) and a commercial general liability policy from The Burlington Insurance Company (Burlington). Both insurance companies denied a duty to defend in the underlying lawsuit initiated by Cruse and Duckworth.Artisan filed a suit in federal court seeking a declaration that it owed no duty to defend under its auto policy due to an operations exclusion clause and that Burlington owed a duty to defend. The district court denied both companies' motions for judgment, finding an ambiguity in Artisan's policy that should be construed in favor of the insured and that Burlington had a duty to defend some claims not covered by Artisan's policy. Both Artisan and Burlington appealed.The appeals court, applying Illinois law and conducting a de novo review, found no ambiguity in Artisan's policy. The court concluded that the operations exclusion applied because the injuries arose from the operation of the crane attached to the truck, whose primary purpose was to provide mobility to the crane. As such, Artisan had no duty to defend. Since Artisan had no duty to defend, the court determined that Burlington did have a duty to defend under its policy. Thus, the court affirmed in part and reversed in part the decision of the district court. View "Artisan and Truckers Casualty Company v. Burlington Insurance Company" on Justia Law

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Venequip, a Venezuelan heavy-equipment supplier, sold and serviced products made by Illinois-based Caterpillar. Venequip’s dealership was governed by sales and service agreements with CAT Sàrl, Caterpillar’s Swiss subsidiary. In 2019 CAT Sàrl terminated the dealership. The contracts contain clauses that direct all disputes to Swiss courts for resolution under Swiss law. In 2021 Venequip brought contract claims against CAT Sàrl in Geneva, Switzerland. Venequip filed applications across the United States seeking discovery from Caterpillar and its employees, dealers, and customers under 28 U.S.C. 1782(a), which authorizes (but does not require) district courts to order any person who resides or is found in the district to give testimony or produce documents “for use in a proceeding in a foreign or international tribunal.” Venequip’s Northern District of Illinois application sought wide-ranging discovery from Caterpillar.Ruling on Venequip’s application, the district judge addressed four factors identified by the Supreme Court (Intel) that generally concern the applicant’s need for discovery, the intrusiveness of the request, and comity considerations, and added the parties’ contractual choice of forum and law and Caterpillar’s agreement to provide discovery in the Swiss court, then denied the application. The Seventh Circuit affirmed. The appeal was not mooted by intervening developments in the Swiss court. The judge appropriately weighed the Intel factors and other permissible considerations. View "Venequip, S.A. v. Caterpillar Inc." on Justia Law

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Current and former policyholders filed a class action lawsuit in Illinois against Country Mutual and 46 of its current and former officers and directors. Every member of the proposed class is an Illinois citizen under the Class Action Fairness Act, CAFA, 28 U.S.C. 1332(d)(2), as are Country Mutual and 45 of the individuals. The 46th defendant, Bateman, is a citizen of Massachusetts. The plaintiffs alleged that the firm accumulated and retained excess surplus of over $3.5 billion from premium revenues exceeding the cost of claims and thereby failed to supply those policies at cost. They claimed breach of contract, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, unjust enrichment, and breach of fiduciary duty.Based on putative class size, the amount in controversy, and the minimal diversity created by Bateman, Country Mutual removed this case to federal district court, 28 U.S.C. 1332(d); 1453(b). The Seventh Circuit remanded to state court. Under CAFA’s internal affairs exception, each claim sounds in allegations of corporate mismanagement that cannot be adjudicated without immersion into the boundaries of the discretion afforded by Illinois law to officers and directors of a mutual insurance company to set capital levels and make related decisions about surplus distributions to policyholder members. The case is also within CAFA’s home-state controversy exception, 28 U.S.C. 1332(d)(4)(B), as Bateman, who creates minimal diversity, is not a “primary defendant.” View "Sudholt v. Country Mutual Insurance Co." on Justia Law

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Scanlon went on leave from his job as a Systems Administrator at McKesson. He requested accommodations to return to work; McKesson temporarily granted some, but not all, of them. Scanlon did not return to work but sought long-term disability insurance benefits under a McKesson group policy underwritten, insured, and administered by LINA. To meet the definition of “disabled” under the policy, an employee must be unable to perform the “material duties” of the employee’s regular occupation and earn 80% or more of the employee’s indexed earnings from working in the employee’s regular occupation. LINA denied Scanlon’s request and denied two administrative appeals after Scanlon supplied VA examination reports and letters and two residual functional capacity evaluations. LINA's medical examiners concluded that Scanlon was not entitled to benefitsIn a suit under ERISA, 29 U.S.C. 1132, the district court found that Scanlon, a veteran, suffered from myriad chronic orthopedic and sleep disorders that cause him pain and impact his daily life but found Scanlon ineligible for benefits, concluding Scanlon did not show that he cannot perform the material duties of his job. The Seventh Circuit vacated. The district court clearly erred when it failed to consider Scanlon’s inability to sit at his desk for eight hours a day as required by his occupation and his inability to perform the cognitive requirements of his job during regular work hours and in its treatment of certain medical records Scanlon provided. View "Scanlon v. Life Insurance Co. of North America" on Justia Law

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Schmutzler, the owner and president of Jadair, was a pilot with decades of experience. Schmutzler applied to American National for an insurance policy on its Cessna airplane in 2019. The application listed Schmutzler as the Cessna’s only authorized pilot; Schmutzler indicated that he was a licensed pilot with an FAA medical certificate. The application included “Minimum Pilot Requirements,” which stated that “there is no coverage in flight unless the aircraft is being operated by the pilot(s) designated on this document who has/have at least the certificates, ratings, and pilot experience indicated, and who … is/are properly qualified for the flight involved.” Schmutzler initialed this provision. The Cessna crashed in May 2020, killing Schmutzler, who was piloting the plane. The crash was caused by a mechanical failure.American National denied coverage because Schmutzler did not have a current and valid FAA medical certificate at the time of the accident; his previous certificate had expired. The district court granted American National summary and declaratory judgment. The Seventh Circuit affirmed. The policy unambiguously excludes coverage for any accident involving the Cessna where the pilot lacks a current FAA medical certificate. That requirement is an exclusion of coverage, not a failed condition of coverage. View "Jadair International, Inc. v. American National Property & Casualty Co." on Justia Law

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The parents work for the School District. Through the District, they contracted for a self-funded health insurance plan. The District, not an outside insurer, bears sole financial responsibility for the payment of plan benefits. The District is also the plan administrator and named fiduciary but contracted with United HealthCare to serve as the third-party claims administrator, with the authority to deny or approve claims. The plan is a governmental plan, so the Employee Retirement Income Security Act does not apply, 29 U.S.C. 1003(b)(1). In 2017, daughter Megan—covered under her parents’ policy—suffered a mental health emergency. United approved Megan for 24 days of inpatient treatment and informed the family that it would not approve additional days. Her parents and Megan’s doctors disagreed and appealed internally within United. They elected to continue Megan’s inpatient treatment. They received a final denial of coverage notice, leaving most of Megan’s treatment expenses uncovered.The family sued United for breach of contract, bad faith, punitive damages, and interest under Wisconsin’s prompt pay statute but did not join the District as a defendant. The Seventh Circuit affirmed the dismissal of the suit. There was no contractual relationship between the plaintiffs and United. Wisconsin law does not permit them to sue United for tortious bad faith absent contractual privity. Wisconsin’s prompt pay statute applies only to insurers. View "Daniels v. United Healthcare Services, Inc." on Justia Law

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After Wynndalco Enterprises, LLC was sued in two putative class actions for violating Illinois’ Biometric Information Privacy Act (“BIPA”), its business liability insurer, Citizens Insurance Company of America, filed an action seeking a declaration that it has no obligation under the terms of the insurance contract to indemnify Wynndalco for the BIPA violations or to supply Wynndalco with a defense. Citizens’ theory is that alleged violations of BIPA are expressly excluded from the policy coverage. Wynndalco counterclaimed, seeking a declaration to the contrary that Citizens is obligated to provide it with defense in both actions. The district court entered judgment on the pleadings for Wynndalco.   The Seventh Circuit affirmed. The court explained that the narrowing construction that Citizens proposes to resolve that ambiguity is not supported by the language of the provision and does not resolve the ambiguity. Given what the district court described as the “intractable ambiguity” of the provision, the court held Citizens must defend Wynndalco in the two class actions. This duty extends to the common law claims asserted against Wynndalco in the other litigation, which, as Citizens itself argued, arise out of the same acts or omissions as the BIPA claim asserted in that suit. View "Citizens Insurance Company of America v. Wynndalco Enterprises, LLC" on Justia Law